A Challenge For The Leading Democratic Contenders
In the next few weeks, events could shape up in a way that will have the potential to be more important in shaping the 2008 primary than all the debates, polls and quarterly earnings statements thus far. It is a relatively small tax bill that could be key in determining each of the leading democratic Presidential candidates view from the “working class” of America.
The bill deals with the issue that wall street millionaires and billionaires have utilized a loophole in the tax code whereas they end up being taxed for “capital gains” (@15%) instead of “income” (@35%). This bill will probably be voted on by at least the House, and if it passes there, it's could force candidates Obama, Clinton, Dodd and Biden to go on record with whom they are with. The hedge fund managers signing big checks to their campaigns, or the “little guys” any good progressive candidate is supposed to represent.
This might present quite a dilemma for several candidates mentioned above, who have enjoyed a corporate gravy train in which they’ve figuratively lapped the GOP contenders in the 1st 2 quarters of reporting in 2007. And it could be a make or break issue for one who doesn’t even have to vote on the issue, former Senator John Edwards.
Edwards has struggled in the campaign so far with the issues that have surfaced regarding his lifestyle being in conflict with his politics. Stories of $400 haircuts have dominated the coverage of him, which has been sparing as of late. The conflict between working for a Wall Street hedge fund group while at the same time running an anti-poverty center hasn’t helped his fundraising and I’m sure Edwards, who really can’t afford to take another hypocrisy hit, knows this.
Last week, Edwards tried to tiptoe around the issue when asked about it at the Howard Debate by citing the "moral disconnect" of taxing hedge fund managers' income at a lower rate than regular workers. However, according to CNBC, an aide said afterward that the comment did not mean he was endorsing the House bill to end that loophole.
Edwards will surely have to side with the little guys he claims to represent here. Even though he is 2nd in bundled donations behind only Senator Chris Dodd, Edwards entire campaign rests on the work he has done on behalf of the poor. To side with the billionaires could be the beginning of the end of his campaign as any sense of consistency will be gone.
Of course this will make him public enemy number one with a very powerful interest group. It could dry up some of his corporate contributions. Politico writer Dan Gerstein laid out probably what is Edward’s best move in the rock v hard place situation he finds himself in. He suggests Edwards gives a big speech on the issue which will essentially reshuffle the 21st century tax deck.
As he puts it…”Call for a 21st-century tax policy that not only makes the tax code fairer but also makes America more competitive. Remind voters we are all in this together, outline a series of ideas to help the middle class meet the challenges of a global economy and to strengthen our fiscal stability, and propose paying for it in part by erasing the carried interest loophole and other unjustifiable double standards like it. Then directly challenge your rivals to have the guts to say no to their friends and do what's right for the country.”
And it could work. And while his new enemies will surely attack him as some sort of country-fried Trotskyite, he will have some new powerful allies on his side. In fact, in recent weeks, the likes of Robert Rubin, Warren Buffet, The Financial Times and The Economist -- hardly redistributionists -- have all deemed the carried interest loophole to be indefensible and endorsed taxing hedge fund and private equity managers' income just like other income.
If I were fighting an economic policy fight, I would be pretty happy to have those folks in my corner.
Buffet summed it up recently at a Clinton fundraiser, where the audience was largely comprised of “money” people. "The 400 of us (here) pay a lower part of our income in taxes than our receptionists do -- or our cleaning ladies, for that matter. If you're in the luckiest 1 percent of humanity, you owe it to the rest of humanity to think about the other 99 percent."
And of course, Edwards is in a prime position to speak on this since much of his campaign has focused on the “2 Americas” concept. Edwards could benefit both his campaign and the Democratic cause by shifting the debate that Republicans have owned for the last 20 years.
If Edwards can help other Democrats find their courage on this issue, he would be doing his party a huge favor in showing differences between the parties. Democrats are going to have to engage on taxes in this election, and what better way to reframe the debate and get the Republicans on the run than by forcing them to explain why a billionaire hedge fund manager should be taxed at a lower rate than a single mother working two or three jobs. At the same time, what better way to prove that Democrats will be different leaders than the Abramoff Republicans than by sticking to their principles and saying no to a powerful lobby on a big fight?